Summary
- Playa Hotels & Resorts’ revenue increased by 12.1%, while operating margin reached 20.1%.
- Recovery in the Jamaican and Mexican segments continues to support the company’s revenue growth rate.
- I believe the company’s shares are not cheaply priced, while I do not expect additional growth catalysts, so my recommendation is hold.
Introduction
Shares of Playa Hotels & Resorts (NASDAQ:PLYA) have risen 18% YTD. Since my previous article, where I talked about limited upside potential, stocks are down 13%, while the S&P is down 5%. In my article, I would like to analyze current trends and update my view on the company’s shares.
The company Playa Hotels & Resorts manages all-inclusive resorts. The main revenue segments are Package (84% of revenue) and Non-Package (14% of revenue). The main geographic revenue segments are Yucatan Peninsula (31% of revenue), Pacific Coast (16% of revenue), Dominican Republic (26% of revenue) and Jamaica (25% of revenue).
Investment thesis
Despite the fact that the company continues to show recovery, I believe that it is still not the best time to open long positions. Firstly, despite the decline in quotes over the past three months, the company’s shares are still not cheap. Secondly, I do not expect a significant improvement in hotel occupancy or an increase in the revenue growth rate or operating margins of the business, so I do not see any clear growth catalysts/drivers that could propel the share price higher in the coming quarters.
